How to Keep the Middleman Out of the Internet

For the Internet to continue to reach its original goals, we need to keep the channels between providers and end users transparent.


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Tim Berners-Lee, the inventor of what would become the World Wide Web, hoped his creation would evolve into a powerful, ubiquitous tool as thousands of individuals, universities and companies worked both independently and together.

Among the web’s most compelling promises was disintermediation. The web would cut out the middleman, increase transparency and streamline the relationship between buyer and seller. Possibly, it would even distribute more of the gains to the true spirits behind the World Wide Web: the designers, the developers and the inventors.

The Internet has succeeded in cutting out the old-fashioned middlemen. But more than a quarter century since its inception, however, the World Wide Web has become the middleman in and of itself. The Internet’s biggest successes — from search engines such as Google and Yahoo to retail giants such as Amazon and eBay to hubs of social exchange such as Facebook and Twitter to sharing economy stalwarts Airbnb and Uber — are all middlemen or intermediaries. And instead of bringing stakeholders closer, they have created their own hierarchy of intermediaries. Buyers are just as far from sellers as they once were. And the more traditional brick-and-mortar business giants such as Wal-Mart and Home Depot are attempting to adopt the Internet as their new sales channel.

Uber and Airbnb, among the newest Internet luminaries, although doing some things differently, are still intermediaries at their core. Uber is taking on the global taxicab business, bringing technology to bear on how cars are allocated and how trips are priced. Indeed, it has popularized the concept of surge pricing (some call it price gouging). But perhaps Uber’s greatest contribution is its willingness to challenge regulators and traditional fleet owners in a business many consider a monopoly.

Airbnb is in a similar boat. It has taken the demand for temporary housing and tourist accommodations and created a geographically dispersed pool that tourists can tap. It too has gained visibility and notoriety by taking on the established hospitality market and allegedly skirting existing laws.

Investors clearly like intermediaries, especially the ones that are first to market and have a bundle of cash to work with. The valuations of Airbnb and Uber — at $13 billion and more than $41 billion, respectively — speak volumes about investor enthusiasm. That is, until the next intermediary comes along.

Stuart Jeffries, a feature writer and columnist for the Guardian in London, wrote last year that when Berners-Lee invented the World Wide Web, “he thought he’d created an egalitarian tool that would share information for the greater good. But it hasn’t quite worked out like that.”

Sure, the systems are more efficient. And we have more data and information than ever before. But some of the stakeholders — the inventors, the developers and the designers on one end; the users on the other — are only slightly better off. For the inventors, the developers and the designers, the rewards have to be more than financial — a guarantee that their vision will stay true, not hijacked.

“There is some sense in which the Internet is in danger of not meeting its potential,” Jeffries quotes an industry proselytizer as saying. He says that he always worried that the tools and the rhetoric around the Internet “could just as readily be co-opted by the Man (by which I mean profit-based organizations and overbearing governments). But arguably that is precisely what has been happening.”

So, is disintermediation dead? Not at all. We think the future of the Internet — and its present — is in disintermediation.

Two recent examples that provide disintermediation in contrasting terms are Apple Pay and Bitcoin. Apple Pay retains the incumbent intermediaries and the payment-processing community. It provides convenience and ease of the payment process to the buyer and the seller by leveraging the modern connected web end points. Analysts see rapid adoption of these payment systems. Bitcoin disrupts the payment process entirely, creating a new currency in the process. It is struggling to gain traction outside of the fringe early adopters, however. Perhaps, there is a middle ground.

Take health care, for example. One of the companies in our portfolio at Artiman Ventures is working on ways to collect data, analyze those data — on site or remotely — and provide the data for use by other doctors and epidemiologists. The doctors use it for diagnosis; the epidemiologists use it for analysis. You can be thousands of miles away but always close to someone who can look at your clinical data and put it in a larger epidemiological context. The technology is perfect for obtaining a quick diagnosis and getting early information into a national database to detect trends.

Another company in our portfolio is reversing the traditional control of the shopping process from the seller to the buyer. It captures the intent of the buyers and then provides their intent to the sellers, allowing the buyers to control their own purchase process. This eliminates the need for intermediation and increases transparency for both parties in the transaction. It also levels the playing field between smaller retailers and the big merchants with advantages of scale.

If we can collect data from people, let them see what the data are and allow them to determine how those data can be used, we will witness the web’s computing ability at its best. And the solutions would span the globe — reflective of the Internet’s reach.

The Mayo Clinic Center for Innovation, based in Rochester, Minnesota, is working on a “smart” mirror to help senior citizens, their medical providers and loved ones monitor medications and integrate the data into a larger mosaic. We feel that if we can mediate the space between the seller and the buyer, the caregiver and the consumer and the physician and the patient, we also bring huge gains and savings to the entire market segment.

The reality of disintermediation is that it is also about intermediation. You have to understand the space between seller and buyer, be able to innovate so as to transform the interaction, then create gains for all the stakeholders: the buyer, the seller, the mediator and their communities. The first time you create profit by disintermediation but also disrupt the community, you will have lost your way.

Yatin Mundkur is a managing partner of Artiman Ventures, a venture capital firm based in Palo Alto, California.

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